Metro pact pushes up hotel's private investment
The terms of two key agreements between Metro and the private-sector developers of a proposed convention center hotel were made public today, with a Metro Council vote on the plans expected June 26.
The agreements call for the private-sector proponents to increase their investment by $14 million, with the total cost of the project rising to $212 million. The public sector investment is unchanged, at roughly $78 million.
The agreements address most of the key issues local governments brought up before deciding to go forward with the project.
"We have been able to achieve all the things the (Metro) Council asked for in the term sheet, and what the city and county asked for in the memorandum of understanding," said Andy Shaw, chief of staff to Metro Council President Tom Hughes.
The Hyatt Corp., which would be the proposed hotel's operator, would agree to keep 500 rooms available for future conventions three years out and beyond. It would also keep 300 rooms available for conventions looking to book two to three years out.
Hyatt would require future buyers on the site to honor the room block agreement, and a clause in the site's deed would require that it remain a hotel with an "upper-upscale" quality rating, a tier that includes Hyatt Regency, Embassy Suites, Westin, Kimpton, Omni and Hilton hotel brands.
That, Metro officials said, will ensure the site will continue to generate enough room tax revenue to pay off the roughly $60 million in bonds that will be issued to support the construction of the 600 room hotel. Only taxes on visitors to the planned hotel would pay off the hotel's construction bonds, Metro officials said.
Hughes, the project's main advocate, said in a statement that the project will support the local economy.
"In the ensuing months, Metro has completed negotiating a proposed development agreement and I look forward to hearing from the public about whether the details of the agreement meet the terms we established last year, Hughes said.
The exact amount of the bond issuance is yet to be determined, Metro officials said, but would not exceed $60 million going toward construction of the hotel. They said the final amount issued will depend on Hyatt's revenue projections, ensuring that the hotel will generate enough tax revenue to pay off the bonds.
Negotiators also have a tentative agreement with the Mortenson group, a privately-held development consortium based in Minneapolis with a bonding capacity of up to $4 billion. That group is building five major hotel projects in the United States, Metro said, as well as the Minnesota Vikings' new $1 billion stadium.
Metro said it would take out a form of insurance on the project's construction, to ensure its completion if, for some reason, Mortenson was unable to finish the work.
The regional government would use $600,000 of its committed $4 million grant toward the project to pay for pre-development work. Other negotiated elements include active ground-floor use, an agreement on marketing strategies with Travel Portland and the signing of a labor peace agreement with the UNITE HERE union. Mortenson's development fee will not exceed 3.5 percent, the agreement says.
The project is tentatively set to break ground in a year, with completion set for late 2017.
All of that, of course, is contingent on the outcome of legal challenges to the project. Some downtown hoteliers, skeptical of the project's public financing component, have filed two lawsuits to try to put the project to the vote.
One was rejected by a Multnomah County judge and was appealed to the state appeals court, and another pending case in Clackamas County will likely be appealed regardless of the outcome in the lower court.
Through a little-known process called validation, Metro is seeking to have a judge declare the project legally sound in Multnomah County Court. A favorable ruling for Metro in that case would enable the regional government to issue the bonds needed to move forward with construction.